A summary of his remarks is as follows:
On the economic impact of COVID-19…
“We have experienced a period in which demand declined precipitously while we prioritized urgent health concerns. Through the actions taken to support the economy, we were able to preserve employment to a large extent and maintained continued access to financing. With the exception of certain sectors, we are now seeing a strong return in demand.
“The burden of the crisis is even more severe for small enterprises and informal workers. Clearly, the support programs in many ways do not cover unregistered workers. Stimulus provided to the real sector was provided through loans. Small businesses are far more disadvantaged in that regard as well. So, while the recovery is strong in certain sectors, it continues to be slow and costly in others. This is a fragmented recovery, not a comprehensive one, and this situation will continue to exasperate inequalities.
“The significant amount of credit injected into the market provides time for businesses. Of course, the decline in supply and demand will increase bankruptcy rates this year. However, we think that the economic support provided will prevent a chain reaction. Debt collection has resumed. It is necessary to wait a little longer for the dust to settle.”
Recovery in 2021…
“As of June, demand is increasing, and the recovery will continue. However, for the past three years, the economy was already on a low growth trajectory that was far below the average growth rates in our history. While many institutions have far more pessimistic estimates, we expect a 2% contraction this year. Full recovery in 2021 will depend on the trajectory of global economic conditions.”
On the areas of risk in the Turkish economy…
“Turkey is entering a period of limited foreign capital inflows and financing investments with domestic savings. Negative real interest rates have a deterrent effect on savings. If there is no foreign capital inflow, investments will either remain limited or we will need to transition to an interest rate policy that increases savings.
“It is not possible to achieve economic balance in another way. Trying to keep interest and exchange rates low, is a significant drain on our reserves. A further depletion of reserves may cause concern in the markets and impact our credit rating. It is not possible to limit the current account deficit by imposing tariffs on imports. This policy decreases our competitive power by increasing import costs.
“We do not currently see a problem in foreign debt repayment, and we do not need IMF funds. What we do need, however, are policies that are compatible with free market principles. Managing the free market and preserving its stability is not an easy task. However, the cost of restricting it or retreating from free market principles due a failure to manage it, would be quite high.
“When you reduce market freedom, you may achieve better control or benefit in the short term, but in the long term you will lose investors. During periods when we strengthened the free market in the 1980s and early 2000s, we achieved serious economic breakthroughs.
“At the moment, the supply chain is shifting to the West away from regions where market rules are not enforced and freedoms are not guaranteed. If Turkey wishes to be the destination for some of these redirected supply chains, it must never give up the free market.”
On the role of low-interest loans in the economic recovery…
“Households and small businesses need direct financial support rather than loans under such conditions, therefore, special programs are required. However, let’s not forget that at the beginning of the crisis, a huge amount of liquidity had to be injected into the economy very quickly. We think that it is appropriate to provide most of this to the real sector through banks.
“But banks alone cannot be expected to bear this burden. Treasury insured loans played an important role in providing this liquidity to the banking sector. These loans became lifelines for SME’s in particular, and now we see it has had an effect on demand. Industrial production increased 17% from April to May. Debit and credit card spending has returned to February levels.”
Crisis management prevents needed focus on productivity
“In the medium and long term, our policies need to emerge from the cash flow-credit cycle and focus on fundamental issues such as productivity, innovation, and digital transformation. In the past three years, we haven’t had time to discuss productivity and competitiveness because of the constant need to address economic crises. We still have a long to-do list on the table. Competitiveness does not come from protectionism, but from quality and efficiency. If we focus is on increasing quality and efficiency, there will be increases in investment, employment, and exports.”
On societal risks from high unemployment and high inflation…
“With the impact of the crisis, there is already a serious loss of employment in the informal sector which is reflected in the data. In March, number unemployed increased by one million. This continued in April. If labor support programs are ended, unemployment will not necessarily increase drastically, since many have already started to return to work. However, we are not yet in an environment where employment support can be completely removed.
“Areas such as tourism, transportation, entertainment, and cultural activities remain closed. Employment support programs must continue in these sectors. In order to prevent poverty, direct support for households that have lost income should continue. We also find that the actions taken by municipalities to address these problems have been incredibly useful. In the fight against poverty, central and local authorities should increase cooperation.”
Uncertainty discourages investment
“To increase its share of foreign capital flows, Turkey must ensure investor confidence. Our geographic location and membership in the EU Customs Union are great advantages. Turkey will benefit much more from these opportunities by fostering a healthy investment environment through promotion of rule of law, fair competitive conditions, and a free market environment regulated by independent institutions.
“Currently, uncertainties are spooking investors. There is a need for a predictable economic policy framework. Recently, we have often had to change the rules of the economy to focus on addressing the issues of the moment. Maybe we can solve these problems in the short term, but this is not enough for an investor. Investors want to be able to plan for five, ten years ahead.
“In order to attract new investments, the environment we provide to investors who have already invested here is extremely important. New investors attach great importance to their experiences and opinions. If current investors do not see an environment in which they can increase their investment, it will be very difficult to attract new ones. I don’t just mean direct investors either. This is also true for foreign investors who invest in Turkish Lira assets in financial markets.
“Trust in a country’s economy is closely related to trust in institutions. An effective bureaucracy based on merit is essential to ensure institutional capacities. These principles must be followed in promotions and appointments at all levels. For example, heeding the guidance of our medical experts on the Scientific Advisory Board during the pandemic enabled us to successfully address its challenges. It is extremely important for the success of our economy that policymakers listen to experts in every field.”
On the controversy over the bar associations…
“The bar associations are constitutional entities of the defense. They are one of three essential elements of the judiciary. They exist to protect the individual against state power - to balance a situation that is inherently unequal. It is difficult to understand the justification for changing this important institution in a way that almost all bar associations oppose. It is known that there are problems between the owners of these proposals and the large bar associations, but we have yet to receive a satisfactory explanation for the purpose of having multiple bar associations.
“Bar associations have powers derived from the Constitution. Consequently, viewing bar associations as merely representative, non-governmental organizations is the wrong way to frame this debate. Bar associations provide legal support for individuals and entities that cannot defend themselves. The division of bar associations poses a significant risk to this legal protection.”
On press freedom…
“Freedom of expression and freedom of the press have been problematic issues in Turkey. Once again, we are faced with instances of penalizing the press. One of the criteria of the European Court of Human Rights is that even views that society may find shocking are protected under freedom of expression. We are an EU candidate country that recognized the jurisdiction of the ECHR in 1987.
“We should welcome and benefit from diverse perspectives. It is also very important that we preserve the progress we made in the EU accession process. We also reiterate that freedom of expression is incompatible with slander, insult and calls for violence and here the law already comes into play in such instances. Additionally, let us not forget that the entire world is undergoing digital transformation and experiencing the different challenges to expression that come with it.
“Let’s examine the experiences of other countries to look for solutions. Let’s adopt an approach that protects freedoms and limits restrictions. This is an issue that has implications for the attraction of digital investment as well. During the pandemic, the many benefits of digitalization were utilized. Regulations should be designed to improve the digital ecosystem and maximize the benefits for millions of individuals and businesses.”
On the Istanbul Convention and forced marriage…
“As the first country to sign and ratify the Istanbul Convention, Turkey set an example for the world. The Istanbul Convention is a strong commitment to the women of the world. I believe that Turkey will not renege on this promise and will not encourage violent offenders. It is necessary to internalize that women have equal rights with men in every field.
“The debates surrounding child marriage that have occasionally flared up in recent years do not reflect our national conscience. Preventing early or forced marriage and child abuse are among the most sensitive issues for the state and society. The protection of children must not be compromised.”
On the European Union…
“Our relations with the European Union are at a critical juncture, with both the challenging period we are going through and the accumulation of grievances on both sides over the past ten years. Turkey is an indispensable part of Europe. We share common interests and goals. It has been demonstrated first-hand the unmatched importance of the EU for our economic prosperity and tourism, especially during the pandemic.
“In the near future, the EU will accelerate the development of regulations and standards for the digital economy and a new sustainable development model that is environmentally friendly. In this context, protecting the EU integration process and modernizing the Customs Union agreement so that it is compatible with the Digital Single Market and the European Green Deal is the best opportunity for progress. As Europe looks to redirect its supply chains, there is significant opportunity for Turkey. Our EU objective, however, is not only about market expansion.
“Turkey’s connection to Europe is an important part of our modernization history since the 19th century. Turkey’s goal of EU membership is a continuation of its history of modernization, beginning with the Tanzimat reforms of the 19th century and followed by the transformative and most successful period of Atatürk’s revolution in the 20th century. Turkey, as an important member of the transatlantic alliance, a candidate for EU membership, that supports a rules based order, a democratic form of government based on the rule of law, separation of powers, freedoms and that prioritizes diplomacy, dialogue and peace, can contribute to the future of Europe. We should work to build creative solutions to our problems and build mutual trust and cooperation. Sanctions and confrontation should not be a part of the agenda.”
On the eastern Mediterranean…
“We are in a period in which the international system, geopolitical balances and alliances are going through some transformation. The pandemic only accelerated these changes. It is natural for every country to review its security policies on the basis of its national interests and to try to address its weaknesses during periods like this. It is natural for Turkey to bolster itself without, however, breaking from its traditional defense and security alliances. Geopolitical competition is intensifying in the eastern Mediterranean and it is the strategic focus of multiple countries, due to its abundant energy resources.
“Policies that ensure cooperation among littoral states and an equitable distribution of resources is far better for every country involved. In order to mitigate the risks we face, it is vital to utilize our diplomatic soft power more than ever before. Finally, it should be acknowledged that a resolution of the Cyprus issue will also reduce regional risks.”